What to expect when you're expecting...bankruptcy
July 7, 2013 7:49 AM Subscribe
Hi Folks,
Due to a recent MAJOR reduction in household income, Mr. Anonymous and I are filing bankruptcy, something neither of us have done before. We're over the hand wringing and rending of clothing; we believe this is the best step for us and will make for a fresh start. We have spoken with an attorney and will file chapter 13 (reorganization) in a few months. What should we do or expect that we haven't thought of?
I am in the process of getting my name off of a family member's financial accounts so they won't be held hostage.
We will be changing banks on our attorney's advice.
Next month we will stop payment to the affected creditors, including our mortgage (I do understand that ch. 13 doesn't have to include the house, but that is best for us).
We expect lots of unpleasant phone calls from creditors, which our attorney has said we should refer to her.
We understand we won't have access to any credit for years and that our credit score will be affected.
We have all of those basics down and are confidently moving forward.
What else should we do and/or be expecting that we may not have considered?
I did do a search and found that previous questions have more to do with whether and how to file bankruptcy and what chapter.
Please, no advice on how we should try to resolve our problem. Chapter 13 is the route we will take.
Mr. Anonymous and I thank you.
I am in the process of getting my name off of a family member's financial accounts so they won't be held hostage.
We will be changing banks on our attorney's advice.
Next month we will stop payment to the affected creditors, including our mortgage (I do understand that ch. 13 doesn't have to include the house, but that is best for us).
We expect lots of unpleasant phone calls from creditors, which our attorney has said we should refer to her.
We understand we won't have access to any credit for years and that our credit score will be affected.
We have all of those basics down and are confidently moving forward.
What else should we do and/or be expecting that we may not have considered?
I did do a search and found that previous questions have more to do with whether and how to file bankruptcy and what chapter.
Please, no advice on how we should try to resolve our problem. Chapter 13 is the route we will take.
Mr. Anonymous and I thank you.
It's fine to do research on the internet to get a sense of the process / how it feels / what to expect, but if anything conflicts with what your attorney says, listen to your attorney. Sometimes advice on the internet is wrong, and sometimes your situation is just different.
posted by insectosaurus at 8:03 AM on July 7, 2013 [1 favorite]
posted by insectosaurus at 8:03 AM on July 7, 2013 [1 favorite]
Have any student loan debt? They are difficult to discharge through bankruptcy, but hardship exemptions are sometimes applied.
posted by jonp72 at 8:11 AM on July 7, 2013
posted by jonp72 at 8:11 AM on July 7, 2013
What else should we do and/or be expecting that we may not have considered?
Realize that bankruptcy doesn't increase your household income. This is not a comment encouraging you/discouraging you from pursuing bankruptcy. This is a comment noting that unless you solve the root cause of your financial problems - spending more than you earn - bankruptcy will only temporarily alleviate your problems.
We expect lots of unpleasant phone calls from creditors, which our attorney has said we should refer to her.
Please take your attorney's advice here. There is never a reason for you to talk to creditors on the phone (period). It will not help you. Prepare a script here - "please contact my attorney Jane Done at xxx.xxx.xxxx with regards to this matter" and be ready to tell it to the creditor's representative even if it means talking over them. In general, creditors do not contact you by phone because they need information from you or for some innocuous reason, they contact you because it's the most effective way to get money from you.
What else should we do and/or be expecting that we may not have considered?
Depending on your industry, bankruptcy may affect your future job prospects (or not).
posted by saeculorum at 8:16 AM on July 7, 2013 [2 favorites]
Realize that bankruptcy doesn't increase your household income. This is not a comment encouraging you/discouraging you from pursuing bankruptcy. This is a comment noting that unless you solve the root cause of your financial problems - spending more than you earn - bankruptcy will only temporarily alleviate your problems.
We expect lots of unpleasant phone calls from creditors, which our attorney has said we should refer to her.
Please take your attorney's advice here. There is never a reason for you to talk to creditors on the phone (period). It will not help you. Prepare a script here - "please contact my attorney Jane Done at xxx.xxx.xxxx with regards to this matter" and be ready to tell it to the creditor's representative even if it means talking over them. In general, creditors do not contact you by phone because they need information from you or for some innocuous reason, they contact you because it's the most effective way to get money from you.
What else should we do and/or be expecting that we may not have considered?
Depending on your industry, bankruptcy may affect your future job prospects (or not).
posted by saeculorum at 8:16 AM on July 7, 2013 [2 favorites]
Some things do still vary according to where you live, so as insectosaurus says, listen to your attorney more than random people on the Internet. I had a Ch. 13 several years ago, and found that credit was available again very, very quickly after the discharge, although maybe not on the greatest terms. Since you have been working with an attorney, you probably do have a decent overview of how the process usually works, but you might want to read more on your own to make sure you understand and don't have specific questions.
posted by sockasm at 8:21 AM on July 7, 2013
posted by sockasm at 8:21 AM on July 7, 2013
I am in the process of getting my name off of a family member's financial accounts so they won't be held hostage/em>
IAAL, IANYL, IANABL, the last thing I had to do with bankruptcy law was 20 years ago in law school. That said, please make sure your attorney is aware of this and can advise you on any implications this action or its timing may have, if you haven't talked about this already.
posted by marguerite at 11:46 AM on July 7, 2013
IAAL, IANYL, IANABL, the last thing I had to do with bankruptcy law was 20 years ago in law school. That said, please make sure your attorney is aware of this and can advise you on any implications this action or its timing may have, if you haven't talked about this already.
posted by marguerite at 11:46 AM on July 7, 2013
You might want to look into rebuilding your credit with a secured credit card (you secure it with a cash deposit). You use it for purchases that you need to make anyway and, this is critical: pay it off every month on time so you don't actually use the security deposit.
This of course assumes you are confident that you will not misuse it.
posted by Snazzy67 at 12:52 PM on July 7, 2013
This of course assumes you are confident that you will not misuse it.
posted by Snazzy67 at 12:52 PM on July 7, 2013
Things to ask your atty, as IANAL but have known someone in Chapter 13:
- If you choose to keep your financed car in this and roll the payment into the pay off amount, what happens if the car breaks down? This happened to someone I knew and they had to keep fixing it until it was discharged. Lots of people would just go trade it in and get another car but what do you do if they won't let you do that? So ask!
- This person was also prohibited from taking out new loans until the debt was discharged. But I think they could borrow from their 401K at work. So if the bankruptcy manager found out they took out a loan, big trouble. Ask about that because it's not like Chapter 7 and wipeout, obvs, and you don't want to inadvertently take out a secured credit card or payday loan and find out, oops, now I'm in big ka-ka.
- How much of your yearly tax return has to go toward paying the debt? Sometimes they stipulate half or even all of it, so if you are counting on that little windfall every April, ask about that as well.
And of course, listen to your attorney.
posted by Marie Mon Dieu at 2:15 PM on July 7, 2013
- If you choose to keep your financed car in this and roll the payment into the pay off amount, what happens if the car breaks down? This happened to someone I knew and they had to keep fixing it until it was discharged. Lots of people would just go trade it in and get another car but what do you do if they won't let you do that? So ask!
- This person was also prohibited from taking out new loans until the debt was discharged. But I think they could borrow from their 401K at work. So if the bankruptcy manager found out they took out a loan, big trouble. Ask about that because it's not like Chapter 7 and wipeout, obvs, and you don't want to inadvertently take out a secured credit card or payday loan and find out, oops, now I'm in big ka-ka.
- How much of your yearly tax return has to go toward paying the debt? Sometimes they stipulate half or even all of it, so if you are counting on that little windfall every April, ask about that as well.
And of course, listen to your attorney.
posted by Marie Mon Dieu at 2:15 PM on July 7, 2013
One issue with bankruptcy is that while there is a federal law and this all takes place in federal courts (note: some states have their own bankruptcy laws and/or receivership options), practices can vary in surprising ways from federal court district to district, both as a matter of law (case law, because very few bankruptcy issues are taken all the way to the Supreme Court level for standardizing) and trustee attitude and practice. It's also the case that exclusions and other limitations regarding bankruptcy can be under either federal or state law, and your attorney will probably recommend using one or the other based on your particulars.
In general, as someone who is shepherding my parents' household through Ch13 (with some 2 years left to go), I think the empathy that the bankruptcy judges have with the debtors is given short shrift. Trustees can also vary quite a bit, and the trustee is really in some ways more important than the judge; you'll certainly have a lot more contact, especially when your situation undergoes any changes or you have an emergency. Make sure you are communicating with your attorney about what she thinks the trustee will say about any given issue.
found that credit was available again very, very quickly after the discharge
Perhaps not immediately relevant, but I've seen this on the bankruptcy internets, as well. There is definitely going to be a class of creditor who will seek out the newly discharged, for a very good reason -- the lockout period means you won't be able to file again for a while. Makes you a captive audience.
There are going to be many auto financing deals. Do note, however, that you are also locked out from any FHA-backed loans, which severely limits your house-trade-up options, should you be thinking you need to, but you may apply, with trustee approval, for an FHA loan after a year of verified continuous Chapter 13 payments.
BKForum.com, the Bankruptcy Forum, is a good place to read, although you may want to be careful how much you rely on it for Q&A since as noted practices vary by jurisdiction.
In any case, for the next X months (as needed for your case), making the trustee payment is going to be your number one priority over anything else. We got lucky and got "back in" to a Chapter 13 after an initial failure, but our circumstances were pretty special and may not apply to you or your jurisdiction. Getting dismissed can actually make things a little bit worse for you.
For now, focus on making sure that you and your attorney have a workable plan that the trustee will endorse and the judge will approve. Go into meetings like the 341 hearing with a you-said-jump, we-say-how-high attitude. In a way, it will be a relief to have your creditors at bay and certain knowledge of what you'll be paying for the future.
I think the main thing is, though, that once you're in for a while you do eventually realize it's a manageable situation and not the absolute end of the world. You may not have the money for that Greek isles cruise, but you can eat out and go on short vacations. There is light at the end of the tunnel.
posted by dhartung at 4:45 PM on July 7, 2013 [1 favorite]
In general, as someone who is shepherding my parents' household through Ch13 (with some 2 years left to go), I think the empathy that the bankruptcy judges have with the debtors is given short shrift. Trustees can also vary quite a bit, and the trustee is really in some ways more important than the judge; you'll certainly have a lot more contact, especially when your situation undergoes any changes or you have an emergency. Make sure you are communicating with your attorney about what she thinks the trustee will say about any given issue.
found that credit was available again very, very quickly after the discharge
Perhaps not immediately relevant, but I've seen this on the bankruptcy internets, as well. There is definitely going to be a class of creditor who will seek out the newly discharged, for a very good reason -- the lockout period means you won't be able to file again for a while. Makes you a captive audience.
There are going to be many auto financing deals. Do note, however, that you are also locked out from any FHA-backed loans, which severely limits your house-trade-up options, should you be thinking you need to, but you may apply, with trustee approval, for an FHA loan after a year of verified continuous Chapter 13 payments.
BKForum.com, the Bankruptcy Forum, is a good place to read, although you may want to be careful how much you rely on it for Q&A since as noted practices vary by jurisdiction.
In any case, for the next X months (as needed for your case), making the trustee payment is going to be your number one priority over anything else. We got lucky and got "back in" to a Chapter 13 after an initial failure, but our circumstances were pretty special and may not apply to you or your jurisdiction. Getting dismissed can actually make things a little bit worse for you.
For now, focus on making sure that you and your attorney have a workable plan that the trustee will endorse and the judge will approve. Go into meetings like the 341 hearing with a you-said-jump, we-say-how-high attitude. In a way, it will be a relief to have your creditors at bay and certain knowledge of what you'll be paying for the future.
I think the main thing is, though, that once you're in for a while you do eventually realize it's a manageable situation and not the absolute end of the world. You may not have the money for that Greek isles cruise, but you can eat out and go on short vacations. There is light at the end of the tunnel.
posted by dhartung at 4:45 PM on July 7, 2013 [1 favorite]
My SO is a BK attorney. An important piece of advice or instruction your bankruptcy attorney will give you, and you should follow as your polestar, is reducible to 'DO YOUR HOMEWORK.' When your attorney asks you to gather documents, do it promptly and gather all of them. Don't come to a meeting without the material you were asked to bring. Similarly, you may be asked to complete questionnaires or other intake procedures online -- do that promptly, and be complete, and notify your attorney of anything you didn't understand, or couldn't find, in advance of the meeting the 'homework' was for. That doesn't mean the night before. It means a day or two after you were first asked to do it.
Watching from the sidelines, and focussing on logistical concerns rather than legal issues, it's apparent that how organized, responsible and forthcoming the client is in going through the process will have a direct effect on how the trustee reacts and sometimes the court as well -- if your attorney has to delay because you weren't ready for your own meetings and so the plan isn't coming together, or gets caught in some inconsistency between your assertions they've relied on and what the trustee finds, things tend to go badly.
This doesn't require any intentionality on your part -- I'm a somewhat disorganized person myself, and I can imagine that traits or patterns that could lead me into bankruptcy (should it be due to more than just and confluence of misfortune and bad timing etc) could create problems for me there too, despite all the best intentions.
So do your homework. On time.
And as others suggested above, TALK TO YOUR LAWYER before you start taking names off of accounts etc. You should be taking an essentially hands-off approach at this point, and doing things like that only at your lawyer's instruction. Of course, possibly your lawyer is already aware in which case, fine.
posted by snuffleupagus at 6:19 AM on July 8, 2013 [1 favorite]
Watching from the sidelines, and focussing on logistical concerns rather than legal issues, it's apparent that how organized, responsible and forthcoming the client is in going through the process will have a direct effect on how the trustee reacts and sometimes the court as well -- if your attorney has to delay because you weren't ready for your own meetings and so the plan isn't coming together, or gets caught in some inconsistency between your assertions they've relied on and what the trustee finds, things tend to go badly.
This doesn't require any intentionality on your part -- I'm a somewhat disorganized person myself, and I can imagine that traits or patterns that could lead me into bankruptcy (should it be due to more than just and confluence of misfortune and bad timing etc) could create problems for me there too, despite all the best intentions.
So do your homework. On time.
And as others suggested above, TALK TO YOUR LAWYER before you start taking names off of accounts etc. You should be taking an essentially hands-off approach at this point, and doing things like that only at your lawyer's instruction. Of course, possibly your lawyer is already aware in which case, fine.
posted by snuffleupagus at 6:19 AM on July 8, 2013 [1 favorite]
Also, this excellent (sidebarred!) post by bswinburn from a while back is worth reading, as though you are past the reservations in that askme, it may help you feel more right with the world.
posted by snuffleupagus at 6:28 AM on July 8, 2013
posted by snuffleupagus at 6:28 AM on July 8, 2013
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posted by dilettante at 7:57 AM on July 7, 2013